Life insurance premiums on personally owned policies outside super are generally not tax-deductible, because the policy is capital in nature and the death benefit is not assessable income. Income Protection is the well-known exception.
The rule below is general advice. Your specific tax position depends on how the cover is owned and how the premium is funded. Confirm with your registered tax agent or the ATO before lodging.
The ATO position
The deductibility test in ITAA 1997 s8-1 asks whether the premium is incurred to produce assessable income. A standard life insurance policy outside super pays a lump sum on death, which is a capital receipt and is not assessable income to the beneficiary. The premium is therefore not deductible to the individual policy owner. The ATO confirms this position on its insurance premiums guidance pages at ato.gov.au.
This is the opposite of Income Protection. IP benefits are paid monthly as income replacement, and they are assessable income, so IP premiums are generally deductible to the individual outside super. See ATO Taxation Ruling TR 95/35 for the IP position.
Treatment by ownership structure
Outside super, personally owned
- Premium paid from after-tax income.
- Generally NOT deductible to the individual.
- Lump sum benefit on death is generally tax-free to the beneficiary (covered in the next FAQ).
Inside super (super-held life cover)
- Premium funded from your super balance (often pre-tax employer or salary-sacrifice contributions).
- Personal premium deduction is NOT available because you have not paid out of pocket.
- The super-fund trustee may claim a deduction inside the fund on premiums for risk benefits, subject to the fund's tax position. This is not a personal deduction.
- Tax treatment at claim time differs depending on whether the beneficiary is a tax dependant (covered in the next FAQ).
Self-managed super fund (SMSF)
- SMSF trustee may be able to claim a deduction at the fund level, subject to SMSF investment strategy and sole-purpose tests.
- Individual members cannot claim a personal deduction.
- Discuss with your SMSF accountant and refer to the ATO SMSF guidance pages.
Business-owned cover (key person, buy-sell)
- Treatment depends on whether the premium is for a capital purpose (most key person and buy-sell structures) or a revenue purpose (rare).
- Capital-purpose premiums are generally not deductible; the corresponding payout is generally not assessable.
- Revenue-purpose premiums may be deductible but the corresponding payout is generally assessable.
- Engage a business-tax accountant before structuring.
Where the panel PDSs sit on tax
No panel PDS makes binding tax representations to individual policy owners. Each refers you to the ATO or a registered tax agent. AIA Priority Protection PDS (Version 32, 9 November 2025), Zurich Wealth Protection PDS (1 November 2025), TAL Accelerated Protection PDS (12 December 2024), OnePath OneCare PDS (October 2025), ClearView ClearChoice PDS (13 May 2024, update 5 June 2025), NEOS Protection PDS (6 December 2024), Encompass Protection PDS (26 September 2025), Acenda Insurance PDS (27 September 2025), and Futura Protection PDS (1 October 2025) all carry the same disclaimer pattern: tax is the policy owner's responsibility to confirm.
Common considerations
- A combined life and IP policy splits the premium for tax purposes. The insurer's annual premium statement separates the deductible IP portion from the non-deductible life and TPD portions.
- Holding life cover inside super swaps the personal cash-flow cost for a reduction in your retirement balance. The tax effect at claim time is different from the outside-super tax-free position.
- A binding death benefit nomination naming a non-tax-dependant adult child shifts the claim-time tax position materially (see the next FAQ).
- Refer to ATO website pages on Insurance premiums and Personal super contributions for current rules.
Regulator anchor: ITAA 1997 s8-1 (general deductions); ATO Taxation Ruling TR 95/35 (IP premiums); ATO website at ato.gov.au for current insurance-related guidance.